By Glenn Hall, Editor in Chief , On Thursday May 6, 2010, 3:36 pm EDT
There's no other explanation for what happened on the U.S. exchanges. Only machine trading could shave almost 1,000 points from the Dow Jones index in less time than the typical hard-working American takes for lunch.
Even if a human set it all in motion with a so-called "fat-finger error" (that's the scuttlebutt at the moment) -- automated trading is the only explanation for how one person's mistake could become everyone's problem.
No human could have traded so fast and furiously to cause such a stupendous stock market collapse. Thankfully, humans were able to regain control and the Dow closed only 347.8 points lower.
No one really knows what happened yet, but there is lots of chatter about something going wrong in the system. Some look at the precipitous drop in Procter & Gamble shares -- the stock dropped as low as $39.37 before recovering to $60.75, a 2.3% decline.
But we also saw panic selling in General Electric , which closed 4.3% lower, Citigroup , which lost 3.4%, Bank of America , down 7.1% and Ford, which ended the day 4.5% lower. Citi shares showed massive volume of trading, followed by Bank of America, Ford and GE.
I can only hope that retail investors didn't get caught up in all the madness. The machines moved so quickly that hopefully mainly institutional investors took a hit. Perhaps that's fair, since the institutions invented the machines.
But as one reader pointed out, many retail investors may have been harmed by stop loss orders intended to protect them from declines. These automated trades -- made by machines -- sell at a preset limit and can't deal with a situation like today when stocks sink and rebound in the blink of an eye.
Think we'll be revisiting the issue of high-frequency trading now?
You bet we will.
Grandpa: the market launch 75+% from March 9, 2009 to May 2010. Golly Glenn, how do you explain this monster move in the face of "real" U.S. fundamental economic data let alone blending it with the global climate? You are such a mini-me Cramer. As long as the market remains in launch mode, no one care about why or how it rises but when a dose a reality hits the mindless bulls who spin data CNBC style, now "you bet we will".
"..in less time than the typical hard-working American takes for lunch". Are you related to Christina Romer Glenn or are you on the ballet for November"?
"Thankfully, humans were able to regain control and the Dow closed only 347.8 points lower". You are truly as self serving as Jim Cramer. Quite frankly Glenn, I prefer the machines over the perceived "human" Mad Money!
"Thankfully, humans were able to regain control"
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